Bathurst Resources trading down 7%, trading around 0.81. This represents an opportunity. BTU has been substantially de-risked after resource consent was granted on the Escarpment mine (despite appeal process) We acknowledge volatility is likely over the near term, but reiterate our BUY rating and 12 months price target of $1.55. Some brief commantery below: Broker downgrades We have seen downgrades from two brokers recently. - Downgrades have been a result of appeals. - There was little doubt an appeal was going to come through - and therefore a downgrade on the back of appeal appears a little strange to me. It's not about the appeal, it's about BTU's response to the appeal Three appeals have been lodged against the Escarpment mine approval. - Fairdown Residents association - (I believe will be resolved through mediation process, with BTU putting in place a number of steps to try to apeese local residents around dewatering facility - Forest and Birds, plus environmental group - From our call yesterday, we are more confident that a deal can be reached with the environmental groups that are opposed to the development. This is not done-and-dusted - but we believe a deal can be reached. - The entire NZ Resources Management Act is about responsible management of resources, in a sociallly responsible manner, taking into account financial benefits, versus the impact of exploiting resources. The resources consent decision highlighter exactly this - the financial benefit far exceeds the impact from the Escarpment mine. Look through the volatility. - With the initial Resource Consent approval for the Escarpment mine - Bathurst has actually been substantially de-risked. (ie - burden of proof now moves across to the appealant, rather than Bathurst.) - From April 2012 BTU will be producing around 0.5mt of coal (0.36mt from Denniston Plateau) - All permitted and consented. The appeal does not impact these operations. - A PFS is expected in the next 2 months on Buller North (additional 2.0mt of production potential) - this is not included in anyone's numbers yet. (DFS will commence shortly thereafter) - We expect to see a resource/reserve update shortly, which should provide additional clarity on potential of Bathurst's assets.
I acknowledge there remains risk around Bathurst's development - However looking forward 12 months: - Annualised production of 0.5mt (thermal, SSCC and HCC) from Takitimu, Cascade and Brookdale - We expect appeal process to be well progressed (our conference call yesterday with the Forest and Bird Society contributed to a more postive view on resolution. - We expect further clarity around Buller north potential.
James Stewart Investment Analyst ? Mid Cap Resources
CLSA Australia Pty Ltd
CLSA House Level 15, 20 Hunter Street Sydney NSW 2000
BTU Price at posting:
67.5¢ Sentiment: Buy Disclosure: Held
